Onerous contracts have long been common in the startup industry. My impression is that one of the things that has made YC successful is striving for a reputation for providing better terms for founders, but out in the wild places where reputation doesn't count and funding is turned from competitive to a competition where investment is the prize, it's amateur hour. $5000 isn't going to provide much runway for a startup, and funding just one team isn't going to make for a valuable portfolio. The contract is just a reflection of a failure to distinguish between barbershops and startups.